George Floyd died tragically during an arrest by Minneapolis Police officers on May 25, 2020. Mr. Floyd’s highly publicized death ignited demonstrations and protests across the United States and Canada against police brutality and in support of anti-racism. Many individuals are also showing their support to this cause with donations to community groups, non-profit organizations, and other fundraising campaigns with a related mission or purpose.
One of the more successful fundraising campaigns has been the George Floyd Memorial Fund established by Mr. Floyd’s brother, Philonise Floyd, on GoFundMe, an online crowdfunding platform. This campaign has raised just over $14 million to date, far surpassing its original target of $1.5 million. The overwhelming success of this GoFundMe campaign invites the question – what happens if more funds are donated to a fundraising campaign than originally requested?
Crowdfunding campaigns are often created in order to raise money for a specific purpose or project. If more money is raised than is needed to fulfill the campaign’s intended purpose, then there will be surplus funds. A common example is a GoFundMe campaign created to defray funeral expenses and the campaign ends up raising funds over and above the actual costs incurred for the funeral. What is the campaign promoter entitled, or perhaps required, to do with the leftover funds?
In general, if money is donated for a specific purpose and not all of the funds raised can be applied to that specific purpose, the surplus funds may be returned to the donors via a resulting trust. Returning donated monies can be burdensome where there have been a significant number of donors and/or anonymous donors who cannot be easily identified. To help avoid this situation, a campaign promoter can include alternative purposes for which funds can be used. These additional purposes must be set out at the time the funds are solicited.
In the case of the George Floyd Memorial Fund, the GoFundMe page states:
“This fund is established to cover funeral and burial expenses, mental and grief counseling, lodging and travel for all court proceedings, and to assist our family in the days to come as we continue to seek justice for George. A portion of these funds will also go to the Estate of George Floyd for the benefit and care of his children and their educational fund.”
The above description includes multiple purposes for the collected funds. Some of these purposes likely have been or will be fulfilled, such as the payment of funeral expenses. However, other purposes are seemingly unbounded, such as supporting the care and education of Mr. Floyd’s children. Thus, although the George Floyd Memorial Fund garnered millions of dollars in excess of its original goal, it is likely that all of these funds can properly be applied to the campaign’s defined purposes. If this is the case, then no portion of the collected funds will be considered to be surplus and all of the money should remain available for the benefit of the Floyd family.
Thanks for reading!
Funerals can be expensive. Coming up with the money required for a proper disposition of remains can be difficult for many.
One option that is available to assist in paying funeral expenses is crowdfunding.
A recent search of “funeral” on gofundme.com revealed 1,759,748 results. According to the gofundme.com website, over 125,000 memorial campaigns were commenced per year, and over $400m was raised per year. Click here for a link to the gofundme.com funeral fundraising information page.
An article on funeraldirect.co on crowdfunding for funerals gives tips on how to mount a successful crowdfunding for funeral expenses campaign. Tips include:
- Use bright images or videos;
- Use descriptive and catchy titles;
- Spread the word using other social media, such as Facebook and Twitter;
- Share the link directly to friends and family;
- Keep supporters updated on the progress of the campaign;
- Make it clear how the donations are to be used; and
- Thank contributors for their support.
With respect to how the funds can be used, see an excellent blog from Suzana Popovic-Montag, Does Crowdfunding Establish a Trust?
Have a great weekend.
In 2014, a Toronto-based company successfully raised $1,235,389 (USD) of its $48,000 goal on Indiegogo for its wireless speaker system promising better-than-stereo sound. More recently, the website Gofundme provided the platform which allowed the parents to a 4 year old girl to raise $2,026,470 (USD) to help their child receive a potentially life-saving therapy trial.
Hardly a week goes by without a story on the success of yet another crowdfunding campaign. In what began as an alternative financing model, modern crowdfunding as it exists today has grown to become an extremely successful and potentially lucrative fundraising source. As a result, the legal question that has been raised is whether funds raised by means of crowdfunding constitute a trust, with all of the rights and obligations that this may entail.
The definition of a trust according to Black’s Law Dictionary is, “An equitable or beneficial right or title to land or other property, held for the beneficiary by another person, in whom resides the legal title or ownership.” At first glance, this is precisely what many crowdfunding campaigns seek to do. The funds raised are often held by a third party for the benefit of another. However, determining who occupies which role within the trust relationship can be difficult to navigate.
There are four parties in most crowdfunding campaigns: the donors, the website provider, the campaign creator, and the beneficiaries. As a result, it is not entirely clear whether it is the website provider or campaign creator that acts as trustee and, if it is the website provider, whether they hold these funds in trust for the campaign creator or the purported beneficiary of the campaign. As each crowdfunding campaign can vary significantly with respect to its set-up and intended purpose, determining whether a trust relationship is present is an exercise to be undertaken on a case by case basis.
For instance, some crowdfunding campaigns offer rewards in exchange for meeting a minimum donation level. In this sense, it could be argued that these rewards constitute consideration and the relationship becomes contractual in nature. In other campaigns, the funds are raised for a charitable purpose and as such, may be qualified as charitable trusts. On the other hand, campaigns established by friends and family that purport to raise funds for their loved ones, seek to provide a benefit to a private individual, as opposed to a general purpose. It is often these cases that lead to questions surrounding whether a trust has been established, or, in the alternative, whether a gift has been made.
According to this paper by Professor Oosterhoff, the law has generally provided that funds raised for a specified object give rise to a trust. Accordingly, Oosterhoff’s answer is that it depends on what the intentions of the donor were. He suggests that we need to look specifically at whether the donors intended to establish a trust or whether their relationship to the other parties can be characterized as one of contract or agency.
If a trust is established, the person(s) receiving the initial funds (whether it is the campaign creator or website provider) may find themselves in a fiduciary relationship. Trust law creates a higher standard of care and imposes and bestows rights and obligations upon both the trustee and beneficiaries. As a result, those engaged with crowdfunding campaigns, in any capacity, should be alert to this possibility and act accordingly.
Thank you for reading.